Tata Power lines up Rs 12.5 billion capex plans in wind power

According to reports, amid a major drop in fresh capacity addition by wind energy farms, Tata Power, part of the $100 billion Tata Group, plans to spend around Rs 1,250 crore to build electricity generating capacity aggregating to around 180 MW. In addition the firm also plans to set up solar power generating units with potential to produce more than 50 MW of power by the end of 2013-2014.

Rahul Shah, chief business development officer, India business & renewables of Tata Power, told Financial Chronicle that a lot of companies in India stalled their wind capacity development plans after the government withdrew the accelerated depreciation benefits and tax incentives last year. “But our investment into renewable source of power is not based on garnering tax benefits but it’s a company policy to generate 25 per cent of the total portfolio via clean energy sources. We would continue to achieve our target of 150-200 MW of power in wind sector and around 50 MW in solar segment annually,” said Shah.

Wind-based power generation is more established with stable tariffs, while the solar industry is evolving with a higher generation cost compared to fossil fuel based power plants. The cost of generation from solar power units that use the sun to generate electricity has fallen around 50 per cent to Rs 7 per unit compared with Rs 16 two years back. Weak demand for photovoltaic panels in Europe and US and surplus capacity in China is leading to a price drop for equipment. “This is as an opportunity for us since the grid tariff for conventional power is also getting higher due to a hike in input cost like imported coal. The higher the grid tariff, the closer it gets to solar tariff and soon the difference between the gird and solar tariff would be around Re 1 per unit” added Shah.

But Saudi Arabia’s plans to set up a solar mission plan could trigger an increase in the equipment price, fears Shah. Also imposition of import duty by the Indian government could boost cost of generation by another 10 per cent. However, if these two instances do not take place in short term there may be a decline of around 10 per cent in the equipment cost, he feels.

At present, cost of setting up a wind power project is around Rs 6-6.2 crore per MW and for solar it is around Rs 9-10 crore per MW including interest cost during construction and setting up transmission and switchyard infrastructure in remote areas.

Tata Power has an installed capacity of around 376 MW in wind and 30 MW in solar across India, especially in Tamil Nadu, Karnataka, Maharashtra and Gujarat. “We are also foraying into Rajasthan to set up a wind project there,” said Shah. Tata Power sells all its power via a power purchase agreement to local state discoms.

The company also sees strong opportunities arising in solar from various states, which are coming out with their solar power plans. The BSE listed firm is also waiting to participate in some more wind projects in some of the south Indian states like Tamil Nadu.